China’s Polyethylene Industry Faces Deepening Oversupply Crisis Amid Global Market Pressure
Date: October 24, 2025
By: HIT and HOT NEWS
China’s polyethylene (PE) industry — one of the largest in the world — is facing a severe oversupply crisis, sending ripples across the global petrochemical market. According to a recent report by industry-analysis firm ICIS, the country’s PE market remains deeply oversupplied, with profit margins and price spreads falling well below historical “supercycle” levels.
A Market Drowning in Supply
Over the past several years, China has significantly expanded its polyethylene production capacity, driven by heavy investment in petrochemical infrastructure. However, slowing domestic demand, weaker global trade, and excessive output have now led to a glut in supply, overwhelming both local and export markets.
ICIS analysts noted that production levels are far exceeding consumption rates, leaving manufacturers struggling with inventory build-up and squeezed profit margins. The once-profitable sector has entered what experts describe as a “prolonged downcycle,” with little sign of immediate recovery.
Falling Spreads and Shrinking Profitability
The price spreads — the difference between raw material costs and product selling prices — have declined to their lowest levels in years. This reflects not only oversupply but also weak demand growth from key downstream industries such as packaging, construction, and consumer goods.
Polyethylene, a vital material for plastic bags, containers, films, and household products, has traditionally been one of China’s strongest industrial sectors. But global inflationary pressures, declining export orders, and sluggish domestic consumption have combined to push profit margins close to zero for many producers.
Global Implications
China’s role as both a major producer and consumer of polyethylene means that its internal market imbalance is having far-reaching global consequences. Oversupply in China has led to falling export prices, affecting petrochemical producers in the Middle East, Southeast Asia, and Europe.
As a result, global trade flows are being reshaped, with producers seeking alternative export destinations or reducing operating rates to stabilize prices. Industry experts warn that if production continues at its current pace, the market could see a “second wave” of price declines in early 2026.
Causes Behind the Crisis
Several factors have contributed to this ongoing crisis:
- Rapid Capacity Expansion: Over the last five years, China added multiple large-scale ethylene and polyethylene plants, increasing production capacity faster than demand growth.
- Sluggish Domestic Demand: The slowdown in China’s manufacturing and consumer sectors has sharply reduced PE consumption.
- Weaker Global Economy: Reduced international demand for Chinese exports has lowered packaging material consumption, one of PE’s primary uses.
- Geopolitical and Trade Pressures: Trade tensions and shipping disruptions have affected export markets, limiting China’s ability to offload excess supply.
Producers Under Pressure
Major state-owned and private producers, including Sinopec, PetroChina, and several independent refiners, are reportedly cutting output or delaying new project launches. Many firms are now focusing on cost optimization and product diversification, shifting towards higher-value materials such as ethylene-vinyl acetate (EVA) and specialty plastics to offset falling profits in basic polyethylene.
Outlook: Recovery Still Distant
Market analysts believe that the oversupply situation may persist through 2026, with any recovery dependent on global demand stabilization and capacity rationalization. The industry may also benefit from policy-driven green initiatives, as China pushes for recycling and sustainable plastic alternatives to reduce environmental impact and balance the market.
Until then, however, the polyethylene sector is expected to remain under intense economic pressure, with volatility in pricing and profitability likely to continue.
Conclusion
China’s polyethylene oversupply crisis serves as a wake-up call for the global petrochemical industry. What was once a booming sector is now grappling with the realities of excessive capacity, weak demand, and global economic headwinds.
The coming months will test the resilience and adaptability of China’s producers — and determine whether the world’s largest PE market can transition from oversupply to a more sustainable, demand-driven future.
“Balancing growth with stability is now the industry’s greatest challenge.”
